The recent news about the opening of a streamlined new border post between South Africa and Mozambique would be particularly good news if it does indeed speed up the movement of people and goods between South Africa and Mozambique. A streamlined border will not only benefit tourism, but also enhance trade and Foreign Direct Investment (FDI).
The FDI benefit to Africa of opening up borders to trade is very often underestimated. In Conversations Behind Closed Doors – our Baird’s CMC study of American C-suite executives’ attitudes toward investment in Africa in partnership with the US Chamber of Commerce, respondents pointed out that slow borders are obstacles to investment. The reason why slow borders handicap investment is quite simple and logical: many national markets in Africa are too small to merit investments on an acceptable scale by multinational corporations. This phenomenon is not unique to Africa; Switzerland recently joined the Schengen treaty which opened its borders to the Schengen countries giving Swiss based corporations easy access to the attractive Schengen treaty markets of German, Netherlands, Italy and France, amongst others.
To take an Africa example, like land-locked Switzerland, Botswana is not a big enough market by itself to attract investment, but because it is a well-run democracy, Botswana could become attractive as a corporate base for multinational investors targeting Botswana’s neighbours, meaning that the region would swell Botswana’s tiny internal market to acceptable size. However, the experience of logistics companies I consulted, is that the cross-border speed is simply not fast enough for multi-national corporations. Botswana would therefore have to become a more easily accessible hub for the region if it wants significant FDI from these companies. This means opening the borders with its neighbours (or at least some of them, if it is skittish about Zimbabwe) to gain the long term economic growth benefits of FDI. But there is also a price to pay for open borders, in the form of increased competition, migration and other social impacts.
The question is whether Botswana and its neighbours want to live with all the consequences of open borders?